Montefalcon, Christine B.

3D

G.R. No. L-5963 – The Leyte-Samar Sales Co. vs. Sulpicio V. Cea

FACTS:

In a suit for damages by the herein petitioner LESSCO and Raymond Tomassi against the Far
Eastern Lumber & Commercial Co. (FELCO), an unregistered commercial partnership, Arnold Hall, Fred
Brown and Jean Roxas, judgment was rendered against the defendants jointly and severally for the
amount of Php 31,589.14 plus costs. The CA confirmed the award but deducted Php 2,000 representing
the attorney's fees mistakenly included. The decision having become final, the sheriff sold at auction on
June 9, 1951 to Robert Dorfe and Pepito Asturias "all the rights, interests, titles and participation" of the
defendants in certain buildings and properties described in the certificate, for a total price of Php 8,100.

However, on June 4, 1951, Olegario Lastrilla, claiming to be the owner by purchase of all the
shares and interests of defendant Fred Brown in the FELCO, filed in the case a motion and requested
under the law of preference of credits that the sheriff be required to retain in his possession so much of
the deeds of the auction sale as may be necessary to pay his right. Eventually, the judge granted Lastrilla's
motion by requiring the sheriff to retain 17% of the money for delivery to the assignee, administrator or
receiver of the FELCO. This was later on modified, on motion of Lastrilla, and declared that Lastrilla was
entitled to 17% of the properties sold.

Petitioner argues that such orders were null and void for lack of jurisdiction. At their request, a
writ of preliminary injunction was issued. Although the record is unclear and having some indications, it
can be assumed that Fred Brown, like Arnold Hall and Jean Roxas, was a partner of FELCO, was
defendant in Civil Case No. 193 as such partner, and that the properties sold at auction actually belonged
to the FELCO partnership and the partners. Further, it shall be assumed that the sale made to Lastrilla on
of all the shares of Fred Brown in the FELCO was valid. The result then is that when the sale was
effected of the properties of FELCO to Roberto Dorfe and Pepito Asturias, Lastilla was already a partner
of FELCO. Lastrilla's and the lower court's theory is that inasmuch as Lastrilla had acquired the shares of
Brown in Sept. 1949, which is before the auction sale and he was not a party to the litigation, such shares
could not have been transferred to Dorfe and Austrilla.

ISSUE/S:

Does Lastrilla have any proper claim to the proceeds of the sale?

RULING:

No. If he was a creditor of the FELCO, perhaps or maybe. However, he was not. The partner of a
partnership is not a creditor of such partnership for the amount of his shares. Granting arguendo that the
auction sale, excluding the interest or portion of the FELCO properties corresponding to the shares of
Lastrilla in the same partnership (17%), the resulting situation would be that the purchasers Dorfe and
Austrias will have to recognize dominion of Lastrillas over 17% of the properties awarded to them.
Lastrilla acquired no right to demand any part of the money paid by Dorfe and Austrias to the sheriff for
the benefit of FELCO and Tomassi for the reason that his shares (acquired from Brown) could not have
been and were not auctioned off to Dorfe and Austrias. In other words, the owner of property wrongfully
sold may not voluntarily come to court, and insist, "I approve the sale, therefore give me the proceeds
because I am the owner". The reason is that the sale was made for the judgment creditor (who paid for the
fees and notices), and not for anybody else. Wherefore, the orders of the court recognizing Lastrilla's right
and ordering payment to him of a part of the proceeds were patently erroneous, because promulgated in
excess or outside of its jurisdiction. For this reason the respondents' argument resting on plaintiffs' failure
to appeal from the orders on time, although ordinarily decisive, carries no persuasive force in this
instance.

In view of the foregoing, all orders of the respondent judge requiring delivery of 17% of the proceeds of
the auction sale to respondent Olegario Lastrilla are null and void; and the costs of this suit shall be taxed
against the latter. The preliminary injunction heretofore issued is made permanent. So ordered.